Point #1 was:
“An “economic good” is something people want that is scarce.”
The very essence of economics is the idea of an “economic good.”
An economic good is just a fancy term for something that is of limited availability (supply), relative to how much people want it (demand): It is something that is defined by scarcity.
Most things actually fit the idea of an economic good.
In-N-Out Cheeseburgers, Prada purses, Cars, and iPhones are a few examples of economic goods.
But let’s do a little exercise to show how economic goods and scarcity work.
Assume a world where anyone can have anything that they want and nobody has to pay a price for any of the things listed above.
Who wants an In-N-Out Cheeseburger? How many would you like? Who wants a new Prada Purse? How many would you like? Who wants a car? How many for you? And finally, who wants a new iPhone? How many?
Remember, in this imaginary case, there is no difference in price between wanting one In-N-Out Cheeseburger, two Prada Purses, three cars, and four iPhones – and wanting one million In-N-Out Cheeseburgers, two million Prada Purses, three million cars, and four million iPhones – the price is still zero.
If this is how the world works, we very quickly run into a problem don’t we?
There are not enough things – or “goods” – to satisfy everyone’s wants.
Economics is the (human) science of tackling this issue of relative scarcity:
How do we satisfy unlimited wants and desires with limited resources?
Who gets an In-N-Out cheeseburger, and who doesn’t?
Who should eat a Hot-Pocket instead?
Who gets to have a Prada purse – or who should be carrying a purse from Target?
Who gets a car? And who should walk to work? Who should take the bus?
Who gets an iPhone? How often should they get a new one? Or, who should have an old flip phone?
Further, how many cheeseburgers, purses, cars, and iPhones does everyone get to have?
In the end, there are only two ways to decide who gets what, and how much of it.
The problem of scarcity can be solved through a price system – or it can be solved through rationing.
Which do you prefer?